Draft taxation amendments business-friendly: Kadin

Draft taxation amendments business-friendly: Kadin

Rendi A. Witular and Urip Hudiono, The Jakarta Post, Jakarta

The recently completed draft revisions of the tax legislation
have been hailed as business-friendly as they offer relatively
low tax rates while encouraging better compliance among
taxpayers.

Indonesian Chamber of Commerce and Industry (Kadin) chairman
Mohamad S. Hidayat told The Jakarta Post on Wednesday that the
draft amendments offered incentives that would not only stimulate
the economy but also help expand the tax base as a result of the
introduction of a simpler taxation regime.

"In general, we are satisfied with the draft amendments
although several of our submissions were turned down by the
government. There was give and take during the drafting process
and we are comfortable with that," he said.

Hidayat pointed to a number of incentives in the draft
amendments that could help revive the real sector -- including a
plan to scrap the 10 percent value-added tax (VAT) on unprocessed
agricultural produce and a reduction in the income tax rate for
micro and small businesses from the current maximum of 30 percent
to 10 percent.

Another incentive that found favor with the business community
was the proposed introduction of a tax amnesty in one of the
amendments, which was aimed at improving taxpayer compliance,
especially in the corporate sector, he added.

The tax amnesty plan, which is one of the government's top
priorities, was initiated by Coordinating Minister for the
Economy Aburizal Bakrie, himself a former Kadin chairman. The
influential business lobby group has been promoting the idea of
offering a tax amnesty for the past three years as part of its
proposals for comprehensive tax reform.

The Ministry of Finance's Directorate General of Taxation
recently completed reviews of the Tax System Law (No. 16/2000),
the Income Tax Law (No. 17/2000) and the VAT and Luxury Tax Law
(No. 18/2000).

Hidayat said the government had accommodated the interests of
the business community by inviting a team from Kadin to
participate in the drafting of the amendments, with the views of
the team actually being listened to this time around.

The members of the Kadin team included former finance minister
Bambang Subianto, who held office during the administration of
former President B.J. Habibie, and senior accountant John
Prasetyo.

According to Hidayat, among the proposals by Kadin that were
stymied by the tax office was one for compensation should the tax
tribunal accepted a taxpayer's complaint.

The directorate also thwarted Kadin's proposal for the
institution of equality before the law, which would mean that tax
officials would be treated in the same way as taxpayers in
criminal prosecutions involving tax issues.

Meanwhile, Minister of Finance Jusuf Anwar said that although
the proposed amendments would result in a temporary loss of tax
revenue, the government was confident that this would eventually
be compensated for by increased investment.

"If you want to fish, you have to provide some bait. And what
is the bait (to attract investors)? It involves providing a
favorable business environment, including business-friendly tax
policies," he said.

"The government is aiming to convert the taxation, and customs
and excise systems into facilitators for trade, industry and
investment," he added.